Answer

India’s demographic dividend, with 62% in the working-age group, offers great economic advantage and growth potential until 2055, when the median age will rise from 27 to around 39. Declining fertility and limited job opportunities highlight the need for strategic policies and investments to leverage this advantage.

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Opportunities Presented by India’s Demographic Dividend

• Economic Growth Potential: With a young and growing workforce, India can drive economic growth through increased productivity, innovation, and consumption..
• Enhanced Global Competitiveness: A large workforce offers cost-effective labour, making India an attractive destination for foreign investment and outsourcing.
  For example: India ranks among the top destinations for BPO services due to its young, English-speaking workforce.
• Development of Human Capital: Investment in education and skill development can transform the demographic dividend into a skilled workforce, promoting innovation and entrepreneurship.
  For example: Initiatives like Skill India have trained over 20 million individuals, aiming to build a future-ready workforce.
• Increased Domestic Consumption: A sizable young population drives higher domestic demand, boosting various sectors such as consumer goods, housing, and technology.
  For example: The retail sector, valued at $1.3 trillion, is one of India’s fastest-growing industries, supported by a large youth consumer base.
• Social Development and Poverty Reduction: By generating employment and income, a demographic dividend can reduce poverty levels and enhance the standard of living.
  For example: The Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) has provided skill training and employment opportunities to over 1 million rural youth, helping lift many families out of poverty,

Challenges in Leveraging the Demographic Dividend

• Falling Fertility Rates: Declining fertility rates reduce the growth rate of the working-age population, potentially shortening India’s demographic advantage.
  For example: The Total Fertility Rate (TFR) in India dropped to 2.0 in recent years, as per the National Family Health Survey (NFHS-5).
• Low Labor Force Participation: India’s labour force participation rate remains low, particularly among women, limiting economic output.
  For example: As per the Periodic Labour Force Survey (PLFS) 2022-23, the female labour force participation rate increased to 37.0%, yet it still lags behind the global average of around 50%.
• Skilled Workforce Shortage: Despite a large population, a skills gap limits employment in high-demand sectors like manufacturing and technology.
  For example: It is estimated that only 2.3 % of the workforce in India has undergone formal skill training as compared to 68% in the UK.
• Slow Growth in Manufacturing Sector: The manufacturing sector has not kept pace with the growing workforce, reducing job opportunities.
  For example: Manufacturing accounts for only 15% of GDP, significantly lower than in countries like China.
• Infrastructure Bottlenecks: Infrastructure issues, such as inadequate logistics and power supply, hinder industrial growth and job creation.
  For example: India ranks 38th in logistics performance globally, as per the World Bank Logistics Performance Index 2024, highlighting this challenge.
• Dependency on Service Sector: While services have grown, they do not generate as many jobs as manufacturing, limiting economic inclusivity.
  For example: The IT sector employs about 4.5 million people, a fraction of the total workforce, highlighting the need for labour-intensive industries.

Measures Required to Leverage Demographic Dividend 

• Boosting Manufacturing Sector: India must enhance its manufacturing capacity to absorb the workforce, as China did during its demographic dividend phase.
  For example: The Make in India initiative focuses on increasing manufacturing’s share of GDP to 25% by 2025.
• Enhancing Skill Development Programs: Like China’s targeted vocational programs, India should focus on practical skills and industry-specific training.
  For example: The Skill India Mission, however, was a government initiative that aimed to train over 400 million people in India by 2022, addressing industry demands.
• Investing in Infrastructure: India needs substantial investments in infrastructure to facilitate industry growth and attract foreign investment.
  For example: The National Infrastructure Pipeline (NIP) proposes investments worth ₹102 lakh crore by 2025.
• Improving Business Environment: Simplifying regulations and reducing bureaucratic barriers can promote industrial expansion, emulating China’s reforms.
  For example: India improved its Ease of Doing Business rank from 142 in 2014 to 63 in 2020, showing progress.
• Encouraging Female Workforce Participation: Policies promoting gender equality in the workforce can widen the demographic dividend, similar to efforts in East Asia.
  For example: The Stand-Up India scheme supports women entrepreneurship, nurturing inclusive growth.

Challenges in Capitalising on Demographic Advantage 

• Over-reliance on Agriculture: A significant portion of India’s workforce remains in agriculture, limiting productivity.
  For example:  Agriculture employs around 46% of India’s workforce.
• Inadequate Social Infrastructure: Insufficient education and healthcare spending limits workforce productivity and participation, affecting overall economic growth.
  For example: India spends just 1.3% of its GDP on healthcare, significantly lower than China’s 7% in 2022, impacting public health.
• Income Inequality and Regional Disparities: Unequal growth and regional income disparities limit the economic inclusivity.
  For instance: Per capita income in few states of India is significantly below the national average.
• Bureaucratic and Legal Hurdles: Bureaucratic inertia and inconsistent implementation across states lead to poor contract enforcement and high compliance costs.
  For example: Despite improvements in Ease of Doing Business rankings, World Bank data shows India ranks low in enforcing contracts, resulting in delayed legal resolutions for businesses.
• Limitations in Attracting Foreign Investment: Policy unpredictability and intellectual property concerns deter foreign investors, while restrictions on foreign ownership in certain sectors further limit India’s attractiveness.
  For instance: In the retail sector, complex FDI regulations prevent many global companies from establishing a strong presence.

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Way Forward to Harness Demographic Potential

• Strengthening Education and Healthcare Systems: Quality education and healthcare can increase productivity, helping to create a healthy and skilled workforce.
  For example: The National Education Policy (NEP) 2020 focuses on improving learning outcomes and employability.
• Encouraging Formal Employment: Expanding formal employment can ensure job security and social benefits, reducing underemployment.
  For example: The EPFO initiative to extend pension coverage encourages formal sector employment.
• Boosting Entrepreneurship: Promoting startups and MSMEs can generate diverse job opportunities and drive economic growth.
  For example: The Startup India scheme has supported over 50,000 startups, favouring an entrepreneurial ecosystem.
• Focusing on Inclusive Development: Bridging regional disparities and promoting inclusive growth can maximise the demographic dividend’s impact.
  For example: The Aspirational Districts Programme targets underdeveloped areas, aiming for balanced growth.
• Investing in Research and Innovation: Enhancing R&D can build a knowledge-driven economy, similar to China’s focus on innovation.
  For example: India’s Atal Innovation Mission promotes research, aiming for long-term sustainable growth.

India’s demographic dividend offers immense potential for economic growth, provided the right policies are in place. With strategic investments in education, skill development, and industrial expansion, India can unlock its full demographic advantage, facilitating an inclusive and sustained growth and achieving developed nation status by 2047.

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